HINDUSTAN BROWN BOVERI LTD. ETC. versus STATE OF GUJARAT

Citation: [1981] 3 S.C.R. 435 · Decided: 07-04-1981 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Dismissed

Judgment (excerpt)

y 
HINDUSTAN BROWN BOVERI LTD. ETC. 
v. 
STATE OF GUJARAT 
April 7, 1981 
[R. S. PATHAK AND E. S. VENKATARAMIAH, JJ.] 
Gujarat Sales Tax Act, 1969-Sections 16 and 49(2)-Scope of. 
435 
Exercising power under section 49(2) of the Gujarat Sales Tax Act, 1969, 
the State Government exempted the entire tax payable on sale of goods (other 
than prohibited goods) by a registered dealer to an electrical undertaking, certi-
fied for the purposes by the Commissioner; if the electrical undertaking, furnished 
to the selling dealer a certificate in the requisite form that the goods purchased 
were required for the generation or distribution of electricity by the undertaking. 
But according to section 16 or the Act where a dealer has purchased any taxable 
goods under a certificate given by him under section 13 and has used the goods 
for a purpose contrary to such certificate, such dealer becomes liable to pay tax 
on the purchase price of the goods. 
A 
B 
c 
D 
The appellants who were recognised dealers purchased raw materials of 
E 
taxable goods from registered dealers by furnishing a certificate in Form 19 by 
reason of which no sales tax had been paid by them. After manufacturing 
the goods with raw materials, they sold part of the manufactured goods to 
an electrical undertaking in the State against 'C' forms to claim exemption 
from tax on them by virtue of a notification issued under section 49(2) of 
the Act. No tax had been paid on sales effected by them in favour of the 
electrical undertaking. 
On the ground that the undertaking furnished in Form 19 had been violated, 
the Sales Tax Officer levied purchase tax under section 16 on the raw-materials 
purchased by the appeilants. 
The appellants were unsuccessful in their appeals before the Assistant Com-
missioner as well as before the Sales Tax Tribunal. The High Court answered 
the references against the assessees and in favour of the Revenue. 
It was contended on behall of the appellants · (1) that the goods manufac-
tured by them not having been goods the sale or purchase of which had been 
exempted from tax by inclusion in Schedule I they could not be treated as 
F 
G 
having infringed the terms of Form No. 19 notwithstanding the fact that parti-
ff 
cular sales made by them to the electrical undertaking were exempted from 
payment of tax (2) the condition in Form 19 became satisfied immediately on the 
436 
SUPREME COURT REPORTS 
[1981] 3 s.c.R. 
A 
goods being manufactured by the appellants as at that stage the goods were 
really taxable and that a subsequent event of sale to the electrical undertaking 
could not be considered as a violation of the said condition and (3) in a trans-
action of sale if the sale was exempted from lax it could not be said that the 
purchase was also exempted. 
B 
c 
D 
E 
F 
G 
H 
Dismissing the appeal, 
HELD : (I) The expression "taxable goods'" defined in section 2(3~) of 
the Act means goods other than those on the sales or purchase of which no tax 
is payable under section 5 and section 49 or a notification issued thereunder. 
By this definition the dichotomy that existed between "taxable goods" and "lax. 
able events" in the now repealed Act (The Bombay Sales Tax Act, 1959 which was 
in force in the State before the present Act) had been given a go by. 
It may be 
that section 5 and Schedule I refer 10 goods only but section 49 deals with only 
taxable events which result in the exemption from payment of tax on the happen-
ing of the conditions mentioned ther~in or in the notification even though the 
goods in ·question do not come under Schedule 1. [ 446 F-H] 
(2) To find out whether the goods are taxable goods or not one has to 
wait till the disposal of the goods by the dealer in view of the definition of the 
said expression which takes away goods sold under circumstances attracting 
section 49 from the scope of the meaning of that expression. [ 447 A] 
(3) If the sale is exempt from tax under section 49 the goods sold would 
not be taxable goods. [ 447 BJ 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1185 of 
1979, 
Appeal by Special Leave from the Judgment and Order dated 
15.12.1978 of the Gujarat High Court in Sales Tax Reference No. 24 
of 1978. 
AND 
Civil Appeal No. 1187 of 1979. 
Appeal by Special Leave from the Judgment and Order dated 
27.11.1978 of the Gujarat High Court in Sales Tax Reference No. 
I I of 1977. 
K. H. Kaji, T. Sridharan, R. D. Pathak, Miss C. K. Sucharita 
and Mrs. S. Bhandue for the Appella

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